Fiscal Stance

Abstract

Fiscal stance is commonly understood to denote the expansionary or contractionary implications for the economy of a government’s budgetary policy. More precisely, it represents an attempt to summarize, in a single measure, the combined effect on aggregate demand, and therefore potentially on real output and income, of all the various decisions taken by government in respect of public expenditure, taxation and other sources of revenue which go to make up a national budget. As such it presupposes not only that governments can affect demand in this way, but also that it is possible to devise an indicator of this kind which is sufficiently widely accepted as to be useful. This later proposition has been questioned even by a number of self-professed Keynesian economists, who have emphasized the difficulty both of aggregating the effects of the many different items included in the budget and of disentangling these from other potential influences on demand.